Tag brazil economy

When I was a correspondent in Brazil 30 years ago inflation was rampant. It ran at an average of 707.4 percent a year from 1985 to 1989. The salaries of the poor were wiped out within hours of being paid. The country went through three currencies — cruzeiro, cruzado and cruzado novo — while I lived in Rio. The only way out for Brazilians, people joked, was Galeão, the international airport.

Antônio Carlos (“Tom”) Jobim, the composer of “The Girl from Ipanema” (whose name is now affixed to that airport), famously observed that, “Brazil is not for beginners.” It was not then and it’s not now. It’s a vast diverse country, a tropical United States, whose rich and poor are divided by a chasm. High crime rates are in part a reflection of this divide. Flexibility is at a premium in a culture fashioned by heat, sensuality, samba and rule bending. Life can be cheap. You adapt or you perish.

Edmar Bacha, a friend and economist, had coined the term “Belindia” to describe Brazil — a prosperous Belgium perched atop a teeming India. I wrote a story about the poor kids from north Rio, far from the beaches of Ipanema and Leblon, who would get their kicks as “train surfers” — riding the tops of fast-moving trains — rather than surf Atlantic waves. Often they died, electrocuted. I will never forget the twisted corpse of one in the city morgue.

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Brazil, it is often and not quite fairly said, is the country of the future and always will be. As the Olympics focuses global attention on the country, it’s worth exploring the various ways in which this maxim is — and may not be — true.

The puzzle with Brazil is neither its successes nor its failures, but rather the combination of the two. The country has such a dynamic feel, and in the postwar era it saw many years of double-digit economic growth. The Economist featured the country on its cover in 2009 as the next miracle take-off, and in 2012 Germany’s Der Spiegel published a long article titled “How Good Governance Made Brazil a Model Nation.”

Yet Brazil never caught up to the developed world: Its gross domestic product per capita falls about 4 to 7 times short of the U.S. — about where it was more than a century ago. It is now experiencing one of the most severe depressions of any country in modern times. The president, Dilma Rousseff, is in the midst of an impeachment process. The combination of corrupt and violent police, muggings of athletes, polluted water and inadequate facilities have led many to wonder whether Brazil can pull of the Olympics without major embarrassment.

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The Olympic Games in Rio de Janeiro – starting today – had the potential to boost Brazil’s international image. Director of the Wilson Center’s Brazil Institute and Brazil native, Paulo Sotero, tells The Cipher Brief’s Kaitlin Lavinder that this was always an exaggeration. However, he says the Games are somewhat of a missed opportunity.

TCB: If the Olympic Games in Brazil go well – that is, if there are no major security breaches and if the competitions run smoothly – what will this do for Brazil’s international image? And, conversely, if the Games don’t go well, what will be the effect?

Paulo Sotero: I think in either scenario it will not have a major effect. If things go reasonably well, people will understand that this is what happens in major sporting events globally. Before, there’s always a tendency to exaggerate or highlight the negatives: that the country’s not ready, that the venues will not be ready in time, and that the country has various negative aspects. And then, when you come closer to the events, people realize that what needed to be ready was, in fact, ready.

Some predict the angst will pass once the events actually begin, although there are reasons to be skeptical of this. Because unfortunately, there’s no way to paper over Rio’s problems, which are also for the most part Brazil’s problems. Visitors will be mugged; athletes may get sick; fans may be stranded because of lousy logistics. But at the risk of being shouted down by an army of freshly pickpocketed, sewage-soaked sailors, I propose that everyone cut Brazil just a tiny bit of slack during these next few weeks. Why? Because its main sin in hosting these Olympics was a sin of ambition – and that is precisely the kind of sin the global community should be most willing to forgive.

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Slowly and ever so cautiously, economists are daring to let themselves to get optimistic about Latin America’s largest economy again.

For the third week in a row, economists have upped their 2016 and 2017 outlook on Brazil. The consensus of the latest weekly survey published by the Brazilian central bank now sees the economy shrinking by 3.6 per cent this year and growing 1 per cent next year. Just two weeks ago, they were expecting gross domestic product to contract 3.81 per cent this year, roughly the same as in 2015 and to grow 0.55 per cent next year.

The upward revisions are a fillip for the new government led by interim president Michel Temer, who took over from president Dilma Rousseff last month after congress approved impeachment proceedings against her.

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Businesses and investors are cheering the new leadership in Brazil following the suspension of President Dilma Rousseff, who many blame for a deep recession and crumbling finances in Latin America’s largest economy.

Vice President Michel Temer, who officially will replace Ms. Rousseff later Thursday as she steps down to face an impeachment trial, is expected to quickly propose measures to cut spending and rein in entitlements.

Mr. Temer could reduce the number of government ministries — more than 30 exist now — and the potential leader of his economic team is looking to tame budget deficits. These measures aim to shrink a massive budget deficit and restore investor confidence.

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Brazil’s consumer inflation accelerated more than all analysts forecast in April, pushing the market to temper bets the central bank will lower interest rates.

The benchmark IPCA consumer price index climbed 0.61 percent after a 0.43 percent rise the previous month. That was more than the median forecast for a 0.54 percent increase from 44 economists surveyed by Bloomberg. Twelve-month inflation slowed to 9.28 percent.

Annual inflation at more than double the official target has hurt the confidence of Brazilians whose salaries don’t stretch as far as they once did. Making matters worse, the nation is confronting double-digit unemployment and the prospect of a second year of recession. Many believe the scope of the downturn will provide the central bank room to lower its benchmark interest rate from a near 10-year high.